We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards TriCo Bancshares (NASDAQ:TCBK).
TriCo Bancshares (NASDAQ:TCBK) was in 9 hedge funds’ portfolios at the end of September. TCBK shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 8 hedge funds in our database with TCBK positions at the end of the previous quarter. Our calculations also showed that TCBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the fresh hedge fund action regarding TriCo Bancshares (NASDAQ:TCBK).
How have hedgies been trading TriCo Bancshares (NASDAQ:TCBK)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in TCBK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in TriCo Bancshares (NASDAQ:TCBK), which was worth $25.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $7.7 million worth of shares. Basswood Capital, AQR Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to TriCo Bancshares (NASDAQ:TCBK), around 0.37% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to TCBK.
As aggregate interest increased, key hedge funds have jumped into TriCo Bancshares (NASDAQ:TCBK) headfirst. Winton Capital Management, managed by David Harding, assembled the largest position in TriCo Bancshares (NASDAQ:TCBK). Winton Capital Management had $1.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0.5 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TriCo Bancshares (NASDAQ:TCBK) but similarly valued. We will take a look at Matthews International Corp (NASDAQ:MATW), AMC Entertainment Holdings Inc (NYSE:AMC), Opera Limited (NASDAQ:OPRA), and Five Point Holdings, LLC (NYSE:FPH). All of these stocks’ market caps are closest to TCBK’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $44 million in TCBK’s case. Five Point Holdings, LLC (NYSE:FPH) is the most popular stock in this table. On the other hand Matthews International Corp (NASDAQ:MATW) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks TriCo Bancshares (NASDAQ:TCBK) is even less popular than MATW. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on TCBK, though not to the same extent, as the stock returned 6.5% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.